Rankin v Scott Fell and Co [1904] HCA 42

"transfer" to them "10,000 fully paid up shares out of the 30,000 shares to be issued to him."

Held, that, on the face of the document, the meaning of the words "to take 5,000 shares" was clear aad unambiguous. They meant that the respondents would take 5,000 of the 60,000 shares to be issued to the public. Therefore, evidence of conversations between the parties, prior to the dateof the written contract, to show that the 5,000 shares were to be portion of the 30,000 fully paid up shares issued to the appellant, and were to be bought by the respondents from him at five shillings per share, was inadmissible,

Decision of the Supreme Court, ordering a new trial, (1904), 4 S.R. (N.S. 547, varied by ordering that a nonsuit be entered,

ApreaL from a decision of the Supreme Court (1904), 4 SR. (NSW), 547.

'The following statement of the facts is taken from the judg: ment of Grifith O.J.: -

In this case the plaintiff and the defendants entered into a contract in writing, dated 20th January, 1903, by which it was

oe pany and sell to it all Fe pety at Neweastle, together with all the machinery

"nt, nilways, tools, &e, on the property, or belonging thereto 'wad in connection therewith, and all rights held by the plaintiff: Tecspital was to be 120,000 shares of £1 each, of which 30,000 'pereto be issued as fully paid to the plaintiff, 60,000 to be issued sfally paid at not less than 5s. per share, and the remaining 000 to be at the disposal of the company. The 30,000 shares to ic isued to the plaintiff, and £30,000 constituted the full price to Jepuid by the company to the plaintiff, and the £30,000, for which iebentures were to be issued, was to remain a charge upon the opty for two years at 3 per cent. per annum. 'The plaintiff also 'undertook to pay and discharge all debts and other moneys owing bythe proprietary of the property, and to deliver the property fne of encumbrance, except the £30,000 payable to him, subject to the rental of £1,000 per annum, and insurances set out in a 'tain deed referred to as that under which the plaintiff held the yoperty. The contract then went on to stipulate that the 'eendants "agree to take 5,000 shares and to take the sole agney of the said company, and in consideration of their so thing" the plaintiff agreed to transfer to them or whom they night direct 10,000 fully paid up shares out of the 30,000 to be 'sted to him, the transfer to be executed at the time of allotment. The defendants were also to receive by way of remuneration 800 per annum and a commission, and the agency of the com- jauy for ten years, and there were also certain other subordinate amungements. _Theeompany was formally floated, and the 30,000 shares were ently issued to the plaintiff

The plaintiff sued the defendants on the agreement, which was "tout as an agreement that the plaintiff should sell and the "nants should buy from the plaintiff "a further 5,000 of the

fully paid up shares at the price of 5s. per share," and under- 'nd conduct the agency of the company for ten years. The

tS assigned were that the defendants had paid half the

'nd had failed to pay the remainder, and had refused to VOL n. 2

H.C.or A, accept the shares and the ageney. There was also a count fr

refusing to accept the 5,000 shares from the plaintiff, and ay indebitatus count.

'The plaintiff also alleged that he had fulfilled all conditions on his part, with the exception of the undertaking to deliver the property to the company free from all debts and encumbrangs, and that the defendants had exonerated and discharged him from _ the fulfilment of that condition. The defendants by their pleas, amongst other things, denied the alleged contract, denied the plaintiff's readiness and willingness to perform the contract, and denied that they had exonerated and discharged him as alleged,

At the trial, evidence of conversations between the plaintiff and the defendants, prior to the date of the written contract, was tendered on behalf of the plaintiff, to show that the real sub ject matter of the contract, as to the 5,000 shares, was 5,00) of the shares to be issued to the plaintiff, The defendants contended that the contract did not mean that they were to buy any of the plaintiff's shares, but that they were to take that number of the ordinary shares in the company. With considerable doubt, Owen J., who presided at the trial, admitted oral evidence on that point.

On the question of the undertaking to deliver free of encum- brance, His Honor held that the plaintiff had proved that he had substantially carried out his agreement in that respect, and that therefore evidence of exoneration and discharge was immaterisl, There was no question raised as to its being a condition precedent Upon that expression of opinion by the learned Judge no further evidence was tendered on the point by the plaintiff's counsel. 'The jury returned a verdict for the plaintiff for £625, that is, half the price of 5,000 shares at 5s. per share, It appeared that the defendants had paid £625 in respect of these shares, but the evidence was contradictory as to whether that was in part pay ment for shares bought from the plaintiff, or as an instalment on the shares which they were willing to take in the company when

established. A receipt in the following terms was put in evidence by the defendants : -

"Sydney, 9th April, 1903. "Received from Messrs. W. Scott Fell & Co. the sum of sit

'Gi per share on 5,000 shares at 5s. each, in Ocean Colliery imited. se "BE. A. Mircnent. "Trustee for Ocean Colliery Company Limited as per deed of the 19th March, " 1903." "The defendants moved for a nonsuit or entry of verdiet for jm or for a new trial on the grounds (1) that His Honor "should not have admitted evidence of conversations between 'the plaintiff and the defendants before 20th January, 1903, thedate of the written contract, to show that the 5,000 shares 'nentioned in the contract of that date were to be 5,000 fully {il up shares belonging to the plaintiff; (2) that His Honor 'sould not have admitted evidence of conversations before that 'dite to show that the defendants agreed to pay the plaintiff 'thesum of 5s. per share for the said 5,000 shares; (3) that His 'Honor should have nonsuited the plaintiff, inasmuch as there was 'mevidence that the defendants exonerated and discharged the 'phintiff from performance of the condition that he would deliver the property tothe company free from all debts and encumbrances. The Supreme Court (consisting of Darley CJ., Simpson J. ai Pring J.), held, by a majority (Simpson J. dissentiente), that _ His Honor was right in admitting the evidence mentioned in the and second grounds, but were unanimously of opinion that there should have been a nonsuit on the third ground, and granted tile absolute for a new trial on that ground. The plaintiff appealed from the decision of the Full Court minting a new trial on the third ground.

• • Saumes 'and Robson (J. L. Campbell with them), for the appellant. : the trial evidence was tendered in support of the allegation that

ledefendants had exonerated and discharged the plaintiff from Performance of the undertaking to deliver the property free Seumbrance. 'The defendants objected to the evidence, and Silge rejected it as immaterial. 'They should not be allowed fake Advantage of the fact that no such evidence appeared, Hen it was shut out on their own objection. But, without that

. and twenty-five pounds (£625), being instalment of H: ©. or A.

evidence, the plaintiff proved that he had substantially compli) with the condition. It was contemplated by the parties that there should be an eneumbrance to the extent of £30,000, for by the contract the £30,000 was to be a charge on the property The evidence showed that the plaintiff purchased the property from one Cowlishaw, and mortgaged it to him to secure £20,000 of the purchase money with interest. He then transferred the property to the company, subject to the mortgage to Cowlishay for £20,000, and instead of receiving debentures for £30,000, agreed to accept debentures for £10,000. The result of the transaction was that the company got the property subject to - eneumbranees to the extent of £30,000, which was substantially - what had been agreed upon between the parties originally. 'The only difference was that £20,000 of the encumbrance was to be by mortgage instead of debentures. 'The words of the contract thit - the "sum of £30,000 (for which debentures will be issued) is to remain as a charge upon the property" are capable of the con struction that there was to be a charge by way of mortgage, in addition to the debentures. 'The company take over the property on those terms, and the defendants have no cause for complaint. If there has been a substantial compliance with the condition by the plaintiff, the allegation of exoneration and discharge is sur plusage, and may be struck out.

Shand (Broomfield with him), for the respondents. Assuming that the contract was for the transfer of the property subject toa charge, there was no evidence that it was performed. 'The under taking to do so was a condition precedent to the right of the plaintiff to call on the defendants to carry out their part of the contract. It was important that the liability of the company should not be materially different from that stipulated for in the contract. The plaintiff was therefore bound to show that there had been no such alteration. He failed to do this, beeause the mortgage to Cowlishaw was not put in evidence, and there was therefore no evidence of the nature of the liability under it, its duration, rate of interest, &e. It might be that under it the principal could be called up at any time, or that the interest was at a higher rate than 3 per cent. The personality of the mortgagee

wvas also material. 'The plaintiff had a large interest in the com- any, and was therefore unlikely to be hostile to it, whereas the

ortgagee might wait until the company had done developing 'york, and was in financial difficulties, and then foreclose. 'The plaintiff therefore failed to prove a substantial compliance with the eonditions, or an exoneration by the defendants, and should have been nonsuited.

The Supreme Court was wrong in holding that oral evidence yasadmissible to explain the contract to "take 5,000 shares." The natural meaning of those words is that the defendants were to 'sibseribe for 5,000 of the company's ordinary shares offered to the public. 'There is no ambiguity appearing on the document, noris there any arising from the surrounding circumstances. If the words had meant " buy " 5,000 of the plaintiff's shares, a price "youd have been mentioned, and the shares would have been de- scribed in the same way as in other parts of the contract, as "fully paid up," or as "issued to the plaintiff" There being

• noambiguity, the plaintiff cannot give evidence of conversations in onler to show that the parties intended to say something which they have not said: Taylor on Evidence, 8th ed., p. 1021, sec. W87. Ambiguities may not be conjured up when none are apparent. Tt cannot be said that the words are equally applicable to the plaintiff's shares and the ordinary shares. Sinrpson v. Bank of New Zealand (1). is not in point, because the words "the estimate" in that case referred to some subject. matter 'tnown to the parties, which could only be identified by oral willnce, If the evidence of conversations between the plaintiff 'tl the defendants is inadmissible on this point, there is no 'ilenee to support the declaration, and there should be a nonsuit. Mecontract alleged not having been made out, the allegations

a 'etches are immaterial. [He referred to the Supreme Court Procedure Act 1900 (N.S.W. ), see. 7.]

'The undertaking to transfer the property free hot a condition precedent. It is an indepen- fem of the contract, which could be enforced by action. Smpany, if they had been made liable on the shares for the

mortgage money, could have recovered it from the plaintiff damages for breach of contract: Anson on Contracts, 6th ed.,p.2 If not a condition precedent, the allegation of exoneration discharge is immaterial, and may be disregarded, the jury havi found for the plaintiff.

'As to the admissibility of the conversations. The words "take 5,000 shares" refer equally well to eral kinds of sha When the surrounding circumstances raise a doubt as to subject matter, it may be resolved by oral evidence. Here the evidence of the facts, outside the documents, shows that there three kinds of shates, the plaintiff's paid up shares, shares paid

[O'Coynor J. - Is it not a strained interpretation to put upon the contract which compels you to look outside it in order to out what was the price to be paid for the shares 7]

'This is a latent ambiguity appearing from evidence, which was necessarily given, of outside cireumstances, and oral evidence is admissible to expliin it: Doe d. Gord v. Needs (1). If nota latent ambiguity in the legal sense, it is such a patent ambi- guity as may be resolved by oral evidence: Phipson's Law of Evidence, 2nd ed., p

[Grirerrn C.J. - The writer there uses the words "patent ambi- guity" in a sense which includes cases in which the ambiguity only arises from knowledge of the facts surrounding the contract, the words themselves being clear. That is not the sense in which the term is generally used in the authorities.]

Ambiguity manifested on the face of an instrument is not necessarily exclusive of extrinsic evidence to explain it: Colpoys v. Colpoys (2). Oral evidence was admitted to explain what was meant by the words "oak plantation" in a document, the ambi

guity arising on the face of the instrument, in Chambers ¥ Kelly (3).

[ (Grirrirn CJ. referred to Shore v. Wilson (4).] ,

The ambiguity in this case is similar to that in Simpson ¥. Bank of New Zealand (5), and in MacDonald v. Longbottom (6)

in which it was held that oral evidence was admis 1 Non to mention the price in a written contract of sale does FF ata it; silence on that point is equivalent to a stipula- fi for a reasonable price: Valpy v. Gibson (1). Verbal g

• magements actually inade as to the price to be paid may be

sen in evidence on the question of what is a reasonable price, -Frenif the written contract was void for uncertainty, there was «aol contrat for sale of shares, partly executed, as to which ~fhejay have found in the plaintiff's favour, 'The evidenee was

Gurr C.J. [His Honor, having stated the facts, and referred "tothe documents as set out above, proceeded] - The receipt of

• pth April does not in any way conclude the question whether the "825 was paid to the plaintiff as in part payment for shares

fought from him, or whether it was paid, as the defendants

"alleged, to Mitchell as trustee for the company which was then in

contemplation, as an advance on shares which they intended to take in the company. The defendants applied to the Supreme Gust for a nonsuit to be entered, or for a new trial, and the Gort were unanimous in thinking that the condition to deliver

"the property to the company free from encumbrance, except as to

the £30000 payable to the plaintiff, was a condition precedent,

• andalso thought, (in fact it was not in dispute), that there was " wevidenee of any exoneration of the plaintiff from the perform- 2 'nce of that condition, and were therefore of opinion that there
• sioul be a new trial. Upon that point we see no reason to differ
• trom their Honors. All parties were agreed that it was a con- "in and something might, perhaps, be said in support of the 'ntention that the arrangements detailed in evidence were sub- Mautially a compliance with the condition by the plaintiff, meat deal might be said on the other side. But, in the view which I take of the other part of the case, it is not necessary fomally to decide that question. Tt is enough to say that Isee no Taaan to differ from the learned Judges in that respect.

'The ground on which it is contended that there should be a non- watis that there was no evidence of any such contract as alleged,

and that oral evidence to explain or vary the written cont was inadmissible. That question arises on these words of tl contract: "Scott Fell and Company agree to take 5,000 shan id company, and in eon sideration of their so dog J. C. Rankin agrees to transfer ty them or whom they may direct 10,000 fully paid up shares out of the 30,000 shares to be issued to him, such transfer to W. Seott Fell and Company to be executed at time of allotment." The learned Chief Justice and Mr. Justice Pring were of opinion that oral evidence was admissible to show that the 5,000 shares referred to were shares belonging to the plaintiff, and not share of the company, to be issued by the company and which the defendants were to subscribe and take up. Mr. Justice Simpsm was of the contrary opinion. He thought that there was m0 ambiguity, that it clearly appeared from the words that the eo tract was not to take shares from the plaintiff, but to take shares in the company, and therefore that the contract alleged was not proved. Now, there is no doubt that, when the subject-matter of a contract is uncertain, extrinsic evidence is admissible to prove what it was that the parties were bargaining about. 'That is only a rule of common sense. The first case referred to by the _ learned Judges was MacDonald v. Longbottom (1), in which the

defendant had agreed to buy from the plaintiff what was de

seribed as " your wool." What was meant by those words was

clearly something which could not be ascertained from the words themselves, and it was therefore necessary to ascertaity by extrinsic evidence, what the parties were talking about. 'The conditions and limitations under which oral evidence may 'be admitted to explain a written contract for the purposes of construction are stated by many authorities. They are very clearly set out in the case of Shore v. Wilson (2), decided

in the House of Lords. In that case Baron Purke, after wands Lord Wensleydale, says (3): "I apprehend that there are two descriptions of evidence . . . which are clearly admissible

in every case for the purpose of enabling a Court to construe any

written instrument, and to apply it practically. In the first

(1) E. & B,, 97. (2) 90, & F., 355, (3) 9C. &F., at p 555.

R] reno doubt that not only where the language of the H.C. or A.

there aa jstrument is such as the Court does not understand, it is com- 1904

• = evidence of the proper meaning of that language, viqy

stent to receive : sa al Pevkenitie written in a foreign tongue; but it is also com: 5m, y

{where technical words or peculiar terms, or indeed any part etent,

TForesions are used, which at the time the instrument was 'ae 'citen Ind acquired an appropriate meaning, either generally or by local usage, or amongst particular classes." He then refers to eatain authorities for that, position, and proceeds (1): * This esription of evidence is admissible, in order to enable the Court to derstand the meaning of the words contained in the instru- ment itself, by themselves, and without reference to the extrinsic 'futson which the instrument is intended to operate. For the _ppos: of applying the instrument to the facts, and determining what passes by it, and who take an interest under it, a second description of evidence is admissible, viz.,every material fact that vyill enable the Court to identify the person or thing mentioned in the instrument, and to place the Court, whose province it is to 'declare the meaning of the words of the instrument, as near as 'nay be in the situation of the parties to it. The authorities for this position are also numerous. . . From the context of the instrament, and from these two descriptions of evidence, with such cireumstances as by law the Court, without evidence, may itself notice, it is its duty to construe and apply the words of that: 'instrament; and no extrinsic evidence of the intention of the party to the deed, from his declarations, whether at the time of 'his exeeuting the instrument, or before or after that time, is 'ulnissible; the duty of the Court being to declare the meaning what is written in the instrument, not of what was intended tohave been written. The excepted cases in which such evidence admissible, if indeed there be more than one excepted case that is, where there are two subjects, or two objects, both de- bed in the instrument, and each equally agreeing with it), no bearing whatever on the present question." That state- tof the law excludes from our consideration all the cases that teferred to before us. We have to examine the instrument Land if there isno ambiguity on the face of it as to its meaning (1) 9C. & F., at p. 556.

or intention, there is no room for the admission of oral evidence tp qualify it. Some argument took place concerning latent and patent ambiguities, but nobody denies that there must at let be an ambiguity, either patent or latent, before such evidence is admissible. In the case of a latent ambiguity, it must appear from the surrounding circumstances that the words of the document are capable of meaning two or more things. But the words in the present contract are plain. The subject-matter of-the agreement is the formation of the company, of which 60,000 shares were to be issued to the public. The plaintiff is the promoter, and it is his interest to get the company floated, He wishes the defendants to become agents for the company, and as an inducement for them to do so, he agrees to give them the agency of the company, when floated, for ten years, and to transfer to them 10,000 fully paid up shares gratuitously, and they, on their part, are to "take" 5,000 shares and the ageney of the company. Contrasting the language used in the different provisions as to shares, in one case the plaintiff agrees to "transfer" to the defendants 10,000 shares, the transfer to be executed at the time of allotment, and, on the other hand, the defendants agree to "take" 5,000 shares, no price being fixed, - It is not suggested that they were to accept them gratuitously.

It is suggested that they were to pay for them, but the price is - not mentioned. What was meant seems to me quite clear

on the face of the contract, namely, that what the defendants - agreed to do was to take 5,000 shares in the company, to acquire them by subscription in the ordinary way. In that view it was not necessary to mention the price, because by another part of the contract it was provided that the shares were to be issued to the public at not less than 5s. per share. 'The only question is, what did the defendants agree to do, and, on the - construction of the written instrument, it seems to me impossible

to come to any other view than that they agreed to subseribe for

5,000 shares in the company about to be formed. 'That is not the agreement upon which the plaintiff is suing, and therefore ashe - has failed to prove that agreement, the Supreme Court, instead of granting a new trial on a ground which was fatal to the

plaintiff's case, should have disposed of the ease at once, and made the rule absolute for a nonsuit.

e come to the same conclusion, and desire HC. o A. ion, desire

partox J. Thav aly o ald afew words in relatio on to the constructi tion of this 1%

grt, T tdi not pear otherwise to able mi command my entire respect, I should enn eee res tieaty in the ic tn - have thought there as east abjecemttor fpeoneemed;and ea tome that, 39 eo pce ont detaitn 164 every other essential, PE aratce ey, te toe - rd tine thereiare a is PP eva dfor ssued to the plaintiff, eere' take 5,000 shares" i operas ae i are equally appli at this consitutes an ambiguity which Nao applicable, and tim of extraneous evidence. Well, i bese Ge NES agly the words "take 5,000 sgh in one way it is possible to as Tan unusual and im alee ates Seas tay other words in th prohable meaning, sosipported ; Stake," Petra to aid sn plated iy Sues eh "Stake" the contract becomes oj , is placed upon the word MM csiructon 1 - to construction, though ev.

• hich the plainti in favour of the class of sha ike a iff contends that it was i spat es te; vas intended t 1 aaa mn in its natural a ; piapply. Bub

er 'Seage rdinary meaning, and i a is a contract which has = Leraeiserieat tices ome

• " Cli i parent Dakin tno ti conte al relation to a company, and Btn lig oi tract that the plaintif? und ae

• oiving £30,000, Bah 000 falivn property and pl aes aa 30,000 fully paid up shar eisai
• UNG et area and apparently if « person h tion of a e it float the has undertake ae toe We a a en to another th i 1 ee Hate ce ee net e so many » Lisaes a re er, sly abate any ae shares," I do not see ic pars PME his, that be Bar tlstaantcyc eae

is, that he person 80 expressi shares offered to he means to take that pia BB ia {he fo ae eae iaisth Bee ae Sri a htt promo on of the company wail a large number of pai er was himself t : rights, cause of paid up share pepdretuker jor Sed ie Re eisitst any aera his property: and and, sing tha he expression here i: ee ere cing that there is not "buy," but " take,"

a id " but « tak ae ceseerey cane ad ane ssued to the plaintiff; and ai Grae es febers, 60,000 to be the first. issue another 90,000 to sub- st issue, I think i me . I think it would be the

H.C.or A. natural form of expression, if any one of us wished to ha

some of those 60,000 shares in the company, to say that he w "take shares." It is the every day expression. But if one wis! « to purchase promoter's shares, and not to subseribe for shares ing company making up its share list, the ordinary way to expres that desire is to say that one will "buy" shares from some who will sell them. And it seems to me that this form of expre- sion applies itself naturally when one looks at the context. In the first place this form of words, "Scott Fell & Co. agree take 5,000 shares," is unaccompanied by any stipulation asto the price of the shares, Which class of shares is it that scarcely requires that an intending "taker" should state a price or explain the kind he wants? I should say, those which are to be offered to subseribers,and at one uniform price. Looking at the portion of the contract, which seems to define the form in which the 60,000 shares are to be issued, namely, "as fully paid up at not less than 5s, per share," it is clear that if one were, in the ordinary accep: tation of the term, "taking" shares in the company, there is then a measure of price, a minimum, at any rate, fixed as a condition of entrance into the company by taking shares. If, on the other _ hand, the intention of the defendants was to buy shares, om would have expected the expression "buy" or "purchase" to have been used in conjunction with a price to be paid, and I do not think that the facts of such an expression not having been so used, and of the omission of all reference to price, eat be satisfactorily accounted for on the ground of hurry, as Mr ' James suggested. The supposition of hurry is primarily ex cluded from the acts of parties in reducing their conclusions to the form of written contracts. They are to be taken to have sét down all they mean, in reducing their agreement to writing If we had in that writing tery

s of trade which required local or mercantile usage to explain them, or any other of the ingredients mentioned in the ease of Shore v. Wilson (1) and other eases om the subject, one could understand parol evidence being necessary to say what the contract was, or to what it was applicable. But the thing to which this agreement to take shares is to apply is specified on the face of the writing, that is to say, it must apply

5000 of the 30,000 shares issued to the plaintiff, or to 5,000 of "000 to be issued to the public in the first instance. 'The je used are part of our common parlance, against the plain viation of which no sufficient reason has been urged, and in aceeptation they must apply to 5,000 of the 60,000 shares, int to the plaintiff's shares. Confirmation of the natural qutruction is afforded by the immediate context, as pointed out ithe karned Chief Justice. In consideration of Scott Fell & agresing to " take" 5,000 shares in the company, the plaintiff -sto "transfer" to them 10,000 fully paid up shares out of he 30,000 to be issued to him, so that, apparently, a distinction is rivn between 5,000 shares to be "taken" by the defendants, 10,000 fully paid up shares which the plaintiff is to transfer hemat the time of allotment. Nothing is said as to any fer of the 5,000 shares, and that of itself accentuates the ence that the contract, in that part of it, refers to two dif- mnt classes of shares. If it does, there can be no doubt to shich class the 5,000 shares belong. I see nothing therefore in tract from beginning to end which takes away from the "take" its everyday meaning. On the contrary, the writing t deficient in expressions which contirm the presumption that Jurties employed it aptly to convey that meaning. -Tnight add that, if the appellant's argument is correct, and tle is an ambiguity, that ambiguity is patent, being raised on face of the contract by the passage relating to the two classes No authority has been cited to warrant the appellant nding that the rule has become obsolete that, where an iguity is patent, parol evidence is not admissible to solve it.

ig then that the extraneous evidence was erroneously ited, and that the meaning of the parties in their document that which the plaintiff must show in order to succeed,

ink the plaintiff has failed to prove the contract he has set in his declaration,

Consequently his action must fail, and absolute, not for a new trial, as he eon-